Interest Rates Effect on SPIA

[Gearhead Jim]

Insurance companies supposedly invest SPIAs in long term bonds. If true, that would mean that higher rates on long term bonds would provide a higher payout for every dollar invested in a SPIA.
That seems to be true, I recall that SPIA payouts were higher when I retired in 2005 than five years later, despite me having (on average) a shorter life expectancy at that point.

Does anyone have historical info on SPIA payouts purchased at various times over the last 50 years or so?

Since today's higher rates seem to be mostly at the short end, I doubt that they are producing higher payouts right now. But some day?

 

[New Thinking]

SPIAs

There are many other types of SPIAs than just a life-only SPIA. For instance, you can purchase a five-year period certain annuity which is a SPIA. As a result, it's not just long-term bonds the insurer will invest in. They will do an asset/liability match and assets will often be in bonds (government and corporate) but also real estate, money market funds, and other investments. Insurers all have various pricing philosophies so tracking them over 50 years would be difficult.

 

[pb4uski]

And by looking at the IRR of those period certain annuities, especially the longer terms, you can get a fair idea of the IRR of your life contingent SPIA.